I talked to a housing association, active in my constituency, that has done a magnificent retrofit of about 1,000 properties in Charlton. That has hugely improved the comfort of its tenants, who can now keep warm at much less cost. It has improved the appearance of the estate and has won plaudits from everyone, and it was done with a work force who included a number of young unemployed people from the area, who were trained specifically to be able to take up the advantages of employment as part of the scheme. It was an admirable

2 July 2013 : Column 851

scheme. When I was congratulating the housing association on it, the one and only disappointment came when it told me “Well of course this was funded under the old community energy saving programme—CESP—which made it possible and has now ended. We would probably not be able to do this again if we were starting from scratch today.” That is an obvious problem.

Bill Esterson (Sefton Central) (Lab):
My right hon. Friend is talking about the ending of schemes. Does he agree that this is not just about renovating properties where people are living, but about the large number of empty properties in boroughs such as mine which are crying out to be renovated? They are in places where people want to live, where communities can be recovered in the way he just described, but nobody is living there now. Does he agree that the Government need to revisit the issue of funding for empty properties?

Mr Raynsford:
The thrust of my whole speech is about the importance of the Government finding more effective measures to stimulate investment in housing in all sectors. That includes bringing empty properties into use, improving the existing substandard housing stock and building new homes that are needed to increase the supply. The case is overwhelming, but, sadly, as the figures cited in this debate so far have shown, the Government are failing to meet the needs. I am not going to go into that in detail, because it has already been covered.

I wish to draw attention to the new homes bonus. It an extraordinary scheme, and our Front-Bench spokesperson made some pertinent remarks about it. It was launched by the Government as, supposedly, the panacea for the problem of opposition among some local communities to new house building in their area. The theory was that if a financial incentive was given to councils and to communities for agreeing to build new homes, we would get a different attitude—we would have enthusiasm for new house building rather than hostility. And so the new homes bonus was launched.

The new homes bonus is a very expensive scheme. As the National Audit Office report demonstrates, it is costing £668 million in the current year, but that is due to rise to £905 million next year, to £1.1 billion in 2015 and on beyond that, because it is a cumulative bonus that is paid for a six-year period. I have given only the individual one-year costs. When we add in the cumulative costs derived from previous years’ awards, we find that by 2018-19—that is six years ahead, so at the end of the six-year period—on current trends, expenditure on the scheme would be £7.5 billion. It is a very, very expensive use of public money, which is mostly taken from local authorities. The Government talk about it as though it is a Government scheme, but they are putting in only £250 million a year, with the rest coming as a top-slice from local government funding.

Graham Jones:
My right hon. Friend is making a strong argument about the new homes bonus, which is top-sliced from local authorities and given back to those who build. On other policies, such as empty homes and retrofitting, local authorities that have had their income reduced substantially, and are in low-demand areas such as mine and unable to build new homes,

2 July 2013 : Column 852

encounter a perverse incentive, whereby a slew of issues, such as empty homes and dealing with the private rented sector, cannot be dealt with. The money is simply given to authorities that are cash rich and are building more homes, and it is not really in their interests to build any more because they have got enough money.

6.30 pm

Mr Raynsford:
My hon. Friend makes a very good point. The NAO made an absolutely damning comment—I am astonished that the Government have not looked at this one sentence and said that they clearly need to reconsider the scheme. It is, quite simply:

“We found no association between individual local authorities’ planning application approval rates and their numbers of homes qualifying for the Bonus.”

There we have it: the NAO can find no correlation between the granting of planning consent and the awarding of the bonus, yet that is what it is supposed to do—it is supposed to incentivise councils to improve their performance in granting planning consent. No wonder the Government are embarrassed.

Rather than doing what they ought to by carrying out a thorough and quick review of the scheme and winding it up if it is proved to be as ineffective as the NAO indicates, the Government have done another extraordinary thing and announced in the spending review last week that they will take £400 million of new homes bonus money and transfer it to local enterprise partnerships. It is not their own money—only £250 million is Government money, and the other £150 million would otherwise have been paid to local government. It will now go to the LEPs. Whatever happened to localism? I thought the Government’s mantra when they came into office was that they would allow more decisions to be taken locally. This decision muddies the waters and it will be even more confusing to work out where the money goes.

As my hon. Friend the Member for Hyndburn (Graham Jones) pointed out, there is already gross inequality between different parts of the country, many of which are contributing to the new homes bonus and getting nothing out of it while others, which have done nothing to improve their housing performance because they already have a high demand for housing and because it is already been built in those areas, benefit from the scheme. It is a most extraordinary scheme and it will be made even more opaque and confusing. Clearly, such a scheme has no prospect of achieving the incentive effect it was supposed to achieve.

John Healey:
My right hon. Friend has put his finger on it. There is not an economic rationale for the policy, but a political one. Essentially, it is a stealth redistribution from poor areas to wealthier ones with a more active, buoyant and successful housing market.

Mr Raynsford:
My right hon. Friend, as always, is very acute and he realises that this is a political move. The change is being introduced with no analysis and no evidence base—it is a political move that will have significant redistributional consequences in favour of some areas at the expense of others, paying no regard whatever to the principles of localism that the Government used to proclaim.

2 July 2013 : Column 853

John Healey:
May I tempt my right hon. Friend to reflect on one other aspect of the subject he just touched on? If his figures are right—I am sure they are—by 2017-18 this will cost £7.5 billion in total. That cannot be described as a top-slice from local government as it represents almost a third of the total local government expenditure in England. The proposal will fundamentally destabilise the whole system of local government funding within five to six years.

Mr Raynsford:
My right hon. Friend makes a valid point, and it is a further argument for the serious and thorough evidence-based review of the subject that the Government ought to be undertaking. It is shameful that they are continuing to tinker with this failed scheme at a time when there is such an urgent need for the limited funds that are available to be used to best effect to stimulate investment in housing and to have the beneficial economic effects that my hon. Friends and I have been talking about.

The amendment specifically calls for a review of the operation of REITs and their interaction with the housing market. That is important because the scale of investment necessary to secure the level of house building and home improvement we need will require a combination of public and private investment. We must therefore have measures that encourage more private investment in both private and social rented housing. Institutional investment in private renting has been a bit of a holy grail for many years for people who saw it as a way of ensuring an improved private rented sector driven by responsible investors who would be keen to see high standards of investment and management.

Graham Jones:
I am grateful to my right hon. Friend for giving way once again. Will he congratulate my local Labour authority, Hyndburn borough council, which has private institutional investors? The council has got a pension company to invest in private lets to the tune of £14 million and is using that capital to regenerate and provide affordable housing for rent for people who need it. Does he not agree that there should be more such schemes in the UK? That flagship programme has appeared on many television programmes and I am proud to say that a Labour authority is doing it.

Mr Raynsford:
My hon. Friend makes a valid point and highlights the fact that throughout the country, there are a series of partnership agreements between the public and private sectors which are successfully helping to attract increased investment to meet social needs. That is what we need to encourage. I very much welcome amendment 57 because it calls for precisely that: it calls for a review of the REITs programme and how it interacts with the housing market. The thinking behind it is entirely about how we can ensure more effective blending of public and private finance to meet housing needs.

I have gone on quite long enough, so I will let others contribute. I conclude by saying that current policies are not working. We have a stagnant housing market, which is showing very limited signs of recovery. We have massive unmet needs., and we have huge economic problems which should be addressed by an expanded house building programme. I hope the Government will change course.

2 July 2013 : Column 854

Mr Gauke:
It is a pleasure to return this debate to the amendments to clause 38 and schedule 18 to the Finance Bill before us. Before I discuss Opposition amendment 57, I shall say a few words about amendments 30 to 34, which are designed to ensure that clause 38 and schedule 18 work as intended. The clause and the schedule make improvements to the REITs regime. This year’s Finance Bill improves the REITs regime by allowing a UK REIT to treat income from another UK REIT as income of its tax-exempt property rental business. Therefore these amendments do not affect the policy, but rather ensure that it works as intended. The change would generate positive benefits for the REIT industry, and also meets the Government’s wider objectives.

Let me provide some background. During the technical consultation in February, stakeholders told us that the changes as drafted might not work quite as intended. HMRC has consulted further with interested parties, and we agree that minor changes are necessary to achieve the desired policy aims. The problem, as presented by interested parties, concerned the balance of business test, which requires that at least 75% of the REIT’s profits must come from a property business. Interested parties were concerned that in certain circumstances, a REIT that invests in another REIT might fail that test even though the lower-tier REIT derives all of its income from a property business. Consideration of the issue has revealed that minor amendments are required both to the new and the pre-existing legislation. These amendments together will ensure that the Bill’s changes correctly implement the intended policy, which is that profits of a property rental business comprising the new type of tax-exempt income do not include amounts attributable to capital allowances and other tax adjustments.

Turning to Opposition amendment 57, we have had a very broad debate this afternoon. Indeed, it has felt more like an Opposition day debate on housing than a debate on the clause and the schedule. The amendment proposes that the schedule shall come into force after the Chancellor has conducted a review of the interaction of REITs with the housing market, and I hope to address the issue of REITS and the housing market in my remarks.

Cathy Jamieson:
I hoped the Minister would understand that the nature of the debate reflected Opposition Members’ genuine concerns about the Government’s record on housing. But specifically on REITs, when he responds to the arguments in favour of the review, will he be able to say something more about the future of REITs and social housing?

Mr Gauke:
The hon. Lady can rest assured that I will address that very point, if not necessarily every point made in the wide-ranging debate.

The proposal set out in amendment 57 is that

“The Review shall consider…tax measures in place to support house building; and…what steps HM Government have taken to support house building”

but the Government’s view is that there is no need to postpone the changes to the REIT regime, as the proposed review would add little value at this time. There is something of a routine here of the hon. Lady requesting a review and me turning it down, and she asks so nicely that I feel almost pained in doing so, but the reason we believe in this case that a review would add very little is

2 July 2013 : Column 855

that there are not yet any REITs with substantial housing assets on the market, so it is too early to assess any interaction of REITs with the housing market. We do not accept the amendment and I urge her not to press it to a vote.

The new changes to the REIT regime are an example of tax measures to support house building. As REITs represent the supply side of the property market, any improvements to the REIT regime are expected to have a positive impact on the market.

The hon. Lady made a couple of points on how the REIT regime works: the first, which I believe we touched on in Committee, was whether the regime could support people who want to own their own home. It is worth pointing out that residential REITs can provide accommodation only in the private rented sector, so they are not designed, nor could they be used, for the purpose of home ownership.

The second point, on which the hon. Lady intervened, was on the relationship with social housing and what role REITS could play in that sector. There was full consultation in summer 2012 involving a number of one-to-one and group meetings with interested parties in the social housing sector. The reality is that yields on, for example, affordable rents do not appear to be high enough to attract investors into that sector, but I assure her that discussions are ongoing with non-social housing entities and other interested parties to explore the possibility of residential REITs. If a workable residential model can be found, it might be possible to use it to further a move into social housing, and we certainly would not rule that out. At the moment there appears to be no interest in using REITs for those purposes, but we are entirely pragmatic about that.

We believe that REITs have a valuable role to play and we do not want to delay the implementation of the schedule while we conduct a review from which there is little to be gained. For those reasons, I urge the hon. Lady to withdraw the amendment.

We discussed wider housing policy, but I do not intend to be drawn into a lengthy, general debate on housing. I just point out that we announced £5.4 billion of additional support for housing in the last Budget, building on the £11 billion this Government have already committed to investment in housing over the spending review period. Last week’s spending round announcement confirmed a total of £5.1 billion-worth of investment to support housing in England from 2015-16 to 2017-18; £3.3 billion of that new funding is for affordable housing over those years and will support the delivery of 165,000 new affordable homes in England over the next three years. I can also point out some of the recent housing numbers. Housing building starts in England rose by 4% in Q1 2013, seasonally adjusted. Housing starts are 15% higher than in the same quarter last year. Starts are now 62% above the 2009 trough.

Graham Jones:
Will the Minister give way?

Mr Gauke:
No, I want to give the hon. Lady a moment or two at the end of the debate to respond to the points that I make.

2 July 2013 : Column 856

The amendments before us, alongside the changes that already form part of the Bill, show the Government’s continued support for REITs and the UK property sector. I believe the Government amendments will be welcomed by interested parties. The delay that would result from Opposition amendment 57 would be unfortunate and I urge the hon. Lady to withdraw it.

Cathy Jamieson:
I find myself in the same slightly pained position that the Minister described. He said no so nicely, as he normally does, that I hesitate to come back with extremely critical comments. I am disappointed once again that he has not heeded our arguments, especially the argument for a review and a look at how the wider tax regime deals with housing issues.

6.45 pm

As I said earlier, we did not seek in Committee to strike clause 38 or the schedule from the Bill, but we considered it opportune for the Government to consider a wider review. The Minister said that our debate had gone wider than real estate investment trusts. That is true, and it is because the Opposition are so concerned about the Government’s lamentable record on housing. I was disappointed that the Minister did not see fit to deal with some of the issues that were raised, particularly the criticisms arising from the work of the Treasury Committee on the Help to Buy scheme and National Audit Office report on the new homes bonus. I noticed also that the Minister was not tempted to respond to the concerns expressed by my hon. Friends about forward planning, housing strategy, how that would be funded, especially for people who require care and support, and accommodation suited to the elderly.

I am disappointed that once again the Government have come up with warm words, as I mentioned during the debate. Although the Minister said very nicely that he would not have a review, that is exactly the same mantra as we have heard from the Government all the way through the Bill. On every occasion when we simply wanted the Government to scrutinise their policies and report back to the House, they have refused to do so. For that reason, I unfortunately cannot accommodate the Minister’s request to withdraw the amendment. I can see that he is terribly disappointed but not surprised. I therefore intend to press the amendment to a Division.

Question put, That the amendment be made.

The House divided:

Ayes 227, Noes 301.

Division No. 41]

[

6.49 pm

AYES

Abbott, Ms Diane

Abrahams, Debbie

Ainsworth, rh Mr Bob

Alexander, rh Mr Douglas

Alexander, Heidi

Ali, Rushanara

Allen, Mr Graham

Anderson, Mr David

Ashworth, Jonathan

Austin, Ian

Bailey, Mr Adrian

Bain, Mr William

Balls, rh Ed

Banks, Gordon

Barron, rh Mr Kevin

Bayley, Hugh

Beckett, rh Margaret

Begg, Dame Anne

Benn, rh Hilary

Benton, Mr Joe

Berger, Luciana

Betts, Mr Clive

Blackman-Woods, Roberta

Blenkinsop, Tom

Blomfield, Paul

Blunkett, rh Mr David

Bradshaw, rh Mr Ben

Brennan, Kevin

Brown, Lyn

Brown, rh Mr Nicholas

Brown, Mr Russell

Bryant, Chris

Buck, Ms Karen

Burden, Richard

Byrne, rh Mr Liam

Campbell, Mr Alan

Campbell, Mr Ronnie

Caton, Martin

Champion, Sarah

Chapman, Jenny

Clark, Katy

Clarke, rh Mr Tom

Clwyd, rh Ann

Coaker, Vernon

Coffey, Ann

Connarty, Michael

Cooper, Rosie

Cooper, rh Yvette

Corbyn, Jeremy

Creagh, Mary

Creasy, Stella

Cruddas, Jon

Cryer, John

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Sir Tony

Curran, Margaret

Dakin, Nic

Danczuk, Simon

David, Wayne

Davidson, Mr Ian

Davies, Geraint

De Piero, Gloria

Denham, rh Mr John

Dobbin, Jim

Dobson, rh Frank

Docherty, Thomas

Dodds, rh Mr Nigel

Donohoe, Mr Brian H.

Doran, Mr Frank

Doughty, Stephen

Dowd, Jim

Doyle, Gemma

Dromey, Jack

Dugher, Michael

Durkan, Mark

Eagle, Ms Angela

Eagle, Maria

Edwards, Jonathan

Efford, Clive

Ellman, Mrs Louise

Esterson, Bill

Evans, Chris

Farrelly, Paul

Field, rh Mr Frank

Fitzpatrick, Jim

Flello, Robert

Gapes, Mike

Gardiner, Barry

Gilmore, Sheila

Glass, Pat

Glindon, Mrs Mary

Godsiff, Mr Roger

Goggins, rh Paul

Goodman, Helen

Greatrex, Tom

Green, Kate

Greenwood, Lilian

Griffith, Nia

Gwynne, Andrew

Hain, rh Mr Peter

Hamilton, Fabian

Hanson, rh Mr David

Harris, Mr Tom

Healey, rh John

Hermon, Lady

Hillier, Meg

Hilling, Julie

Hodgson, Mrs Sharon

Hoey, Kate

Hopkins, Kelvin

Howarth, rh Mr George

Hunt, Tristram

Irranca-Davies, Huw

Jackson, Glenda

James, Mrs Siân C.

Jamieson, Cathy

Jarvis, Dan

Johnson, rh Alan

Johnson, Diana

Jones, Graham

Jones, Helen

Jones, Mr Kevan

Joyce, Eric

Kaufman, rh Sir Gerald

Keeley, Barbara

Kendall, Liz

Khan, rh Sadiq

Lammy, rh Mr David

Lavery, Ian

Leslie, Chris

Lewell-Buck, Mrs Emma

Long, Naomi

Love, Mr Andrew

Lucas, Caroline

Lucas, Ian

MacNeil, Mr Angus Brendan

Mactaggart, Fiona

Mahmood, Shabana

Malhotra, Seema

Mann, John

Marsden, Mr Gordon

McCabe, Steve

McCann, Mr Michael

McCarthy, Kerry

McClymont, Gregg

McDonagh, Siobhain

McDonald, Andy

McFadden, rh Mr Pat

McGovern, Alison

McGuire, rh Mrs Anne

McKechin, Ann

McKenzie, Mr Iain

McKinnell, Catherine

Meacher, rh Mr Michael

Meale, Sir Alan

Mearns, Ian

Miller, Andrew

Moon, Mrs Madeleine

Morden, Jessica

Morrice, Graeme

(Livingston)

Mudie, Mr George

Murphy, rh Mr Jim

Murphy, rh Paul

Murray, Ian

Nandy, Lisa

Nash, Pamela

Onwurah, Chi

Osborne, Sandra

Owen, Albert

Pearce, Teresa

Perkins, Toby

Phillipson, Bridget

Pound, Stephen

Qureshi, Yasmin

Raynsford, rh Mr Nick

Reed, Mr Jamie

Reynolds, Emma

Reynolds, Jonathan

Ritchie, Ms Margaret

Robertson, Angus

Robertson, John

Robinson, Mr Geoffrey

Rotheram, Steve

Roy, Lindsay

Ruane, Chris

Ruddock, rh Dame Joan

Sarwar, Anas

Sawford, Andy

Seabeck, Alison

Shannon, Jim

Sharma, Mr Virendra

Sheerman, Mr Barry

Sheridan, Jim

Shuker, Gavin

Simpson, David

Skinner, Mr Dennis

Slaughter, Mr Andy

Smith, rh Mr Andrew

Smith, Owen

Spellar, rh Mr John

Stringer, Graham

Stuart, Ms Gisela

Sutcliffe, Mr Gerry

Tami, Mark

Thornberry, Emily

Timms, rh Stephen

Trickett, Jon

Turner, Karl

Twigg, Derek

Twigg, Stephen

Umunna, Mr Chuka

Vaz, rh Keith

Walley, Joan

Watts, Mr Dave

Whiteford, Dr Eilidh

Whitehead, Dr Alan

Williams, Hywel

Williamson, Chris

Wilson, Phil

Winnick, Mr David

Winterton, rh Ms Rosie

Wishart, Pete

Wood, Mike

Woodcock, John

Wright, David

Wright, Mr Iain

Tellers for the Ayes:

Mr Frank Roy

and

Susan Elan Jones

NOES

Adams, Nigel

Afriyie, Adam

Aldous, Peter

Alexander, rh Danny

Andrew, Stuart

Arbuthnot, rh Mr James

Baker, Steve

Baldry, Sir Tony

Baldwin, Harriett

Barclay, Stephen

Baron, Mr John

Barwell, Gavin

Bebb, Guto

Beith, rh Sir Alan

Bellingham, Mr Henry

Beresford, Sir Paul

Berry, Jake

Bingham, Andrew

Binley, Mr Brian

Birtwistle, Gordon

Blackwood, Nicola

Blunt, Mr Crispin

Bone, Mr Peter

Bradley, Karen

Brady, Mr Graham

Brake, rh Tom

Bray, Angie

Brazier, Mr Julian

Bridgen, Andrew

Brine, Steve

Brooke, Annette

Browne, Mr Jeremy

Bruce, Fiona

Bruce, rh Sir Malcolm

Buckland, Mr Robert

Burley, Mr Aidan

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, rh Paul

Byles, Dan

Cairns, Alun

Carmichael, rh Mr Alistair

Carmichael, Neil

Carswell, Mr Douglas

Chishti, Rehman

Clappison, Mr James

Clark, rh Greg

Clegg, rh Mr Nick

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Cox, Mr Geoffrey

Crabb, Stephen

Crockart, Mike

Crouch, Tracey

Davey, rh Mr Edward

Davies, David T. C.

(Monmouth)

Davies, Glyn

Davies, Philip

Davis, rh Mr David

Dinenage, Caroline

Djanogly, Mr Jonathan

Dorries, Nadine

Doyle-Price, Jackie

Drax, Richard

Duddridge, James

Duncan, rh Mr Alan

Dunne, Mr Philip

Ellis, Michael

Ellison, Jane

Ellwood, Mr Tobias

Elphicke, Charlie

Eustice, George

Evans, Graham

Evans, Jonathan

Evennett, Mr David

Fabricant, Michael

Farron, Tim

Featherstone, Lynne

Field, Mark

Fox, rh Dr Liam

Francois, rh Mr Mark

Freeman, George

Freer, Mike

Fuller, Richard

Garnier, Mark

Gauke, Mr David

George, Andrew

Gibb, Mr Nick

Gilbert, Stephen

Glen, John

Goldsmith, Zac

Goodwill, Mr Robert

Gove, rh Michael

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Green, rh Damian

Greening, rh Justine

Grieve, rh Mr Dominic

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Halfon, Robert

Hames, Duncan

Hammond, rh Mr Philip

Hancock, Matthew

Hancock, Mr Mike

Hands, Greg

Harper, Mr Mark

Harrington, Richard

Harris, Rebecca

Hart, Simon

Harvey, Sir Nick

Hayes, rh Mr John

Heald, Oliver

Heath, Mr David

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hendry, Charles

Herbert, rh Nick

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Holloway, Mr Adam

Hopkins, Kris

Horwood, Martin

Howell, John

Hughes, rh Simon

Hunt, rh Mr Jeremy

Hunter, Mark

Jackson, Mr Stewart

James, Margot

Javid, Sajid

Jenkin, Mr Bernard

Johnson, Gareth

Johnson, Joseph

Jones, Andrew

Jones, rh Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kirby, Simon

Knight, rh Mr Greg

Kwarteng, Kwasi

Laing, Mrs Eleanor

Lamb, Norman

Lancaster, Mark

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Leadsom, Andrea

Lee, Jessica

Lee, Dr Phillip

Leech, Mr John

Lefroy, Jeremy

Leigh, Sir Edward

Leslie, Charlotte

Letwin, rh Mr Oliver

Lewis, Dr Julian

Lilley, rh Mr Peter

Lloyd, Stephen

Lord, Jonathan

Loughton, Tim

Luff, Peter

Lumley, Karen

Main, Mrs Anne

Maude, rh Mr Francis

May, rh Mrs Theresa

Maynard, Paul

McCartney, Jason

McCartney, Karl

McIntosh, Miss Anne

McLoughlin, rh Mr Patrick

McPartland, Stephen

McVey, Esther

Menzies, Mark

Mercer, Patrick

Metcalfe, Stephen

Miller, rh Maria

Mills, Nigel

Mordaunt, Penny

Morgan, Nicky

Morris, Anne Marie

Morris, James

Mosley, Stephen

Mulholland, Greg

Munt, Tessa

Murray, Sheryll

Neill, Robert

Newmark, Mr Brooks

Newton, Sarah

Nokes, Caroline

Nuttall, Mr David

O'Brien, rh Mr Stephen

Offord, Dr Matthew

Ollerenshaw, Eric

Opperman, Guy

Paice, rh Sir James

Patel, Priti

Paterson, rh Mr Owen

Pawsey, Mark

Penning, Mike

Penrose, John

Percy, Andrew

Perry, Claire

Phillips, Stephen

Pickles, rh Mr Eric

Pincher, Christopher

Poulter, Dr Daniel

Prisk, Mr Mark

Pugh, John

Raab, Mr Dominic

Reckless, Mark

Redwood, rh Mr John

Rees-Mogg, Jacob

Reevell, Simon

Reid, Mr Alan

Rifkind, rh Sir Malcolm

Robathan, rh Mr Andrew

Robertson, rh Hugh

Robertson, Mr Laurence

Rogerson, Dan

Rosindell, Andrew

Rudd, Amber

Russell, Sir Bob

Rutley, David

Sanders, Mr Adrian

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Shepherd, Sir Richard

Simpson, Mr Keith

Skidmore, Chris

Smith, Miss Chloe

Smith, Henry

Smith, Julian

Smith, Sir Robert

Soames, rh Nicholas

Soubry, Anna

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stanley, rh Sir John

Stephenson, Andrew

Stevenson, John

Stewart, Bob

Stewart, Iain

Stewart, Rory

Streeter, Mr Gary

Stride, Mel

Stuart, Mr Graham

Sturdy, Julian

Swales, Ian

Swayne, rh Mr Desmond

Swinson, Jo

Swire, rh Mr Hugo

Syms, Mr Robert

Teather, Sarah

Thornton, Mike

Thurso, John

Timpson, Mr Edward

Tomlinson, Justin

Truss, Elizabeth

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vaizey, Mr Edward

Vara, Mr Shailesh

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Walker, Mr Robin

Walter, Mr Robert

Ward, Mr David

Watkinson, Dame Angela

Weatherley, Mike

Webb, Steve

Wharton, James

Wheeler, Heather

White, Chris

Whittaker, Craig

Whittingdale, Mr John

Wiggin, Bill

Willetts, rh Mr David

Williams, Mr Mark

Williams, Stephen

Williamson, Gavin

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Wright, Simon

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Noes:

Anne Milton

and

Jenny Willott

Question accordingly negatived.

2 July 2013 : Column 857

2 July 2013 : Column 858

2 July 2013 : Column 859

2 July 2013 : Column 860

7.4 pm

More than four and a half hours having elapsed since the commencement of proceedings on consideration, the proceedings were interrupted (Programme Order, 1 July).

The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

“(4A) In the case of a group, for the purposes of subsections (1) and (2) a distribution falling within section 549A(5) or (7) received by a member of the group is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(4A).

(4B) In the case of a company, for the purposes of subsections (1) and (3) a distribution falling within section 549A(5) or (7) received by the company is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(4A).”’.

‘(2) Subject to what follows, the amendments made by paragraphs 5 to 7 above have effect in relation to distributions received on or after the day on which this Act is passed.

(3) A distribution received by a member of a group UK REIT does not fall within section 549A(5) or (7) of CTA 2010 if it is received in an accounting period of the principal company of the group beginning before the day on which this Act is passed.

(4) A distribution received by a company UK REIT does not fall within section 549A(5) or (7) of CTA 2010 if it is received in an accounting period of the company beginning before the day on which this Act is passed.’.—(Mr Gauke.)

New Clause 11

Stamp duty reserve tax

‘The Chancellor shall, within six months of Royal Assent, publish and lay before the House of Commons a report detailing the distributional impact of any changes to or abolition of Schedule 19 to the Finance Act 1999.’.—(Chris Leslie.)

Brought up, and read the First time.

Chris Leslie (Nottingham East) (Lab/Co-op):
I beg to move, That the clause be read a Second time.

2 July 2013 : Column 862

Hon. Members might not have spotted the announcement on this matter in the Chancellor’s Budget in March. It is a little-noticed provision that was buried on page 64 of the Red Book in the table that sets out whether individual policy decisions will mean a gain or a loss to the Exchequer. This decision did not hit the headlines and very few people spotted it. I should look back and see whether the Chancellor even referenced it in his Budget speech.

This little-known provision is the abolition of something called the stamp duty reserve tax. It is not quite the same as the stamp duty on share transactions that many hon. Members are familiar with. That is, for want of a better term, a financial transaction tax of 50 basis points or 0.5% on share transactions. The stamp duty reserve tax is the equivalent change that was introduced in schedule 19 to the Finance Act 1999. It is essentially a proxy for stamp duty on the return of units in unit trusts to the investment managers who deal in those transactions. If individuals buy units in unit trusts and then surrender or sell them back to the investment manager, a stamp duty of 0.5% has not unreasonably been paid.

The Chancellor, in his wisdom, has decided that that must go. He has decided to forgo the princely sum of £150 million in every financial year henceforth. I am afraid to tell hon. Members that there is a lot of this story to be told. The abolition of stamp duty reserve tax is essentially a decision by the Chancellor to give a tax cut to investment managers.

The new clause calls on the Chancellor, within six months of Royal Assent, to publish and lay before the House of Commons a report on the distributional impact of the change detailing who has benefited—whether it is the lower and middle-income households and families in all our constituencies or the privileged and wealthy investment managers.

Mark Field (Cities of London and Westminster) (Con):
Does the shadow Minister not recognise that the abolition of the reserve tax will be a great enhancement to the UK unit trust industry, which has been losing a lot of business to Switzerland, Singapore and elsewhere? Although he has characterised the beneficiaries as being very wealthy, this change will ensure that jobs are retained in this important industry, especially back-office and middle-office jobs, as it goes from strength to strength in the decades ahead.

Chris Leslie:
I commend the hon. Gentleman for doing his duty to his constituents in the City of London. I confess that they probably will be right up there among the beneficiaries of this change. He is assiduous in speaking up for his constituents, but I am sure he would concede that they are not exactly typical of people in the rest of the country. The people who engage in investment trust transactions and unit trust arrangements may well benefit from this £150 million tax cut.

The Chancellor of the Exchequer was supposedly faced with difficult choices and cuts in the Budget. That he has chosen to give a tax cut of this order at this time is a reflection of his priorities, which are beyond understanding for many Opposition Members.

Mark Field:
Would the shadow Minister be willing to extend his new clause to ensure that it takes into account what has happened since 1999 when the tax was instituted

2 July 2013 : Column 863

under the previous Labour Administration? More importantly, would that reflect Britain’s place in the world and what proportion of the global asset management industry was in Britain in 1999 and is still here today, compared with other countries? That may have a direct impact on why the Chancellor acted as he did in the Budget.

Chris Leslie:
Times are tough, and for most people in the country life is getting harder. I confess, however, that I have not been lobbied by or seen those poor, unfortunate City investment managers knocking at my door, coming to my surgeries, or writing e-mails and saying, “Please, the one thing we need is the abolition of the stamp duty reserve tax. There is massive hardship among investment managers at this time, which demands a £150 million tax giveaway.” Frankly, I think the investment management community is doing reasonably well relative to the rest of the country. Moreover, I do not think that the City of London is uncompetitive. Indeed, all the evidence suggests the opposite and that the City continues to thrive and do exceptionally well—something like £5 trillion in funds is under the management of those investment managers affected by this tax change, and a tax cut of 150 million quid is small change to that community.

We are having this debate because we need to know why the Chancellor decided on this priority—cui bono would be the Latin adage. In whose interest is this? Who benefits from this change? I doubt it is my constituents in Nottingham East, and Government Members must forgive me if I am left with a slightly bitter taste in my mouth when we see the hardship caused by cuts to tax credits, the increase in VAT and the bedroom tax. The Chancellor says that individuals affected by those things must feel the pain and the squeeze, but when it comes to the City and the investment management community, I do not see how they are all in it together or sharing that anxiety.

Mr Russell Brown (Dumfries and Galloway) (Lab):
Yet again I am back on my old hobby-horse about the economy. If this measure is passed and people benefit from it, what will that do to the local economy? Will we see massive spending on our high streets? Will it help to regenerate the economy?

Chris Leslie:
Dare I say that my hon. Friend knows the answer to his question? I do not think it will make a blind bit of difference to the success—or otherwise—of the investment management community, and I have seen no evidence from the Government that this measure is the thing that will transform the economy at this time, or make a massive difference to jobs and growth in society at large.

Let me put this in context: £150 million is a lot of money. In fact, it is exactly the same amount that the Chancellor cut from young mothers when he abolished the health in pregnancy grant—hon. Members will remember from the Chancellor’s first Budget that the health in pregnancy grant was given to mums-to-be to ensure they ate healthily and had a little help at that time. That was slashed; that had to go because £150 million had to be saved, yet in next year’s Budget the Chancellor

2 July 2013 : Column 864

is introducing a £150 million tax cut for the investment management community. That is about the same amount of money as was cut from the child tax credit supplement for one and two-year-olds in that original Budget. In fact, it is about the same amount of money that the pasty tax and the caravan tax were supposed to save—I am sure the Minister will remember that from the ill-fated omnishambles 2012 Budget. All the hassle that fell on the Chancellor’s shoulders at that time was due to saving £150 million. In that context, this is a strange choice by a strange Chancellor.

Stephen Doughty:
My hon. Friend is making a strong point. Does he, like me, think that people will be bemused by this measure when the Government voted recently against a reasonable motion on an international financial transaction tax? When people see those two things, as well as the bedroom tax, what will they make of this Government?

7.15 pm

Chris Leslie:
We had that debate on a financial transaction tax a few weeks ago. I think we managed to extricate from the Minister, despite his reluctance, a suggestion that somehow, somewhere, buried in the Government, there was still some flicker of interest in a financial transaction tax. I am not sure whether it has been snuffed out by this particular measure. If this is the abolition of stamp duty on unit trust transactions, what will be next? What else will they give away to this particular set of fortunate investors? Will the Minister rule out plans to abolish the other financial transaction tax, the stamp duty on equity transactions? Do the Government have that long-standing financial transaction tax, which has been around for several hundred years, in their sights? Conservatives are second to none when it comes to defending the best interests of the wealthiest in society, and I take my hat off to the Minister for managing to slip this little one through in the Budget provisions without anybody really spotting it.

Geraint Davies (Swansea West) (Lab/Co-op):
My hon. Friend has already pointed out that this £150 million saving per year for the very richest should be compared with the bedroom tax saving of £450 million from the very poorest. The difference between the two measures is that the bedroom tax is hitting thousands upon thousands of the poorest people. The bedroom tax costs about £10 per week, and I have had people tell me that their disposable income is being reduced from £30 to £20 per week. With this tax, the £150 million saving is going to a very small number of people who will receive a large amount of money. These are the choices we face in Britain today. Does my hon. Friend think that that is disgraceful?

Chris Leslie:
I am more disappointed that the Government think they can get away with it. I want very much to hear the Minister defend this decision. I am sure he will do so with gusto and alacrity, as ever, but I know that deep inside—the record will reflect that I am looking into his eyes—he realises that this is a completely daft idea. This is not a priority at this time. It is a crazy priority when the public are struggling, and I know that in his heart of hearts he agrees with me. It is not clear where this idea has come from. I saw something

2 July 2013 : Column 865

on the Deloitte website that said there had been many decades of lobbying in favour of this particular change. Perhaps the lobbying is something that the Treasury has eventually succumbed to.

When we line this measure up alongside other examples of largesse the Government have shown to those who are doing very well, it is notable. We cannot take it out of the context of the paucity of the bank levy, which was supposed to raise £2.5 billion in the previous financial year but did not. Last night, the Minister said that they will try to get £2.7 billion next year instead, but they are already £1.9 billion in arrears from the previous two financial years. It will be more than a decade before they are able to recoup the loss. It was notable last night that he did not say that he was certain that £2.5 billion would be brought in from financial years 2011-12 and 2012-13.

I will put the bank levy to one side. After all, what is a couple of billion pounds between friends? The Government refuse to repeat the bank bonus tax, despite the fact that financial services bonuses leapt by 64% in the first month of this year, when all those who benefited from the reduction in the additional top rate of tax—earnings over £150,000 were taxed at the 50p rate, but from, I think, 6 April they were taxed at the 45p rate—rushed out all those bonus payments. Of course, those individuals found ways and means to avoid the higher rate of tax, as the Government helpfully flagged the change up for them far in advance.

Geraint Davies:
Does that not contrast sharply with the 2 million people in Britain who are on payday loans? They could each be given £70 with that £150 million. They are desperate for the money, but instead these tens and hundreds of thousands of pounds are all focused on, again, the very rich. Does that not speak volumes about the cruel values of the Tories?

Chris Leslie:
The point is the context in which these things arrive from the Government. Perhaps it is our fault that we have not successfully flagged up for the wider country what exactly is happening in the Budget or what will happen in future Finance Bills; but for the time being, it is incumbent on the Minister to do at least this one thing: let us have the distributional analysis showing who benefits from the change. Which deciles, in terms of the affluence of society, will gain the most from this £150 million tax cut? The case for it has not been made. It has not been high on the public agenda. There is no problem in the City or the investment management community of such significance that it merits this intervention by the Chancellor, at the expense of the health in pregnancy grant or the cuts to tax credits that merited the pasty tax and the caravan tax.

This £150 million tax cut is an incredibly important totem of the Chancellor’s priorities. It is a sign that he does not care about the fact that most people—the typical family—will be paying an extra £891 this year because of the tax and benefit changes made since 2010. Those who have found themselves pushed into greater deprivation and poverty will look at the decision and be absolutely disgusted that this is the Government’s priority now. This change has no justification. The Minister has not made the case for it. We need more information about who benefits from the arrangement.

2 July 2013 : Column 866

All that comes on top of the Government’s giveaway on the bank levy, their failure to repeat the bonus tax, the millionaires’ tax cut from 50p to 45p and other changes hidden in the Bill, such as making the additional tier 1 debt coupon tax deductible for the banks, which The Times described thus: “Chancellor to the banks’ rescue with secret £1 billion tax break”. Lots of people will have questions, although not necessarily about this Minister’s priorities. He is doing the best of a bad job and having to cope with the hand he has been dealt. He is, I am sure, a decent and honourable chap, but when he goes home this evening, turns on the television and sees the hardship afflicting families up and down the country, I would ask him to keep in mind whether making a tax cut of £150 million for those investment managers was the right call to make at this point in the economic cycle, such as there is a cycle involved.

Mr Russell Brown:
I come very much from the school that says that if someone is under a bit of pressure and struggling, it is only right for the Government to try to step in, but I am amazed by the figures. In 2011, the UK fund management industry was up 5%, after double-digit growth in the previous two years. The industry is not struggling. Why on earth should we consider giving even more money to people who, at the end of the day, are not in desperate need?

Chris Leslie:
That is the £150 million question. The tax cut is £150 million in the key years, but it goes up to £160 million in financial year 2017-18. It gets greater and greater as time goes on. If we roll all the numbers together, as the Chief Secretary to the Treasury is wont to do when presenting figures in the Budget, we get a total of £600 million of tax cuts in this area in the Red Book. I am sure that you could think of a good use for £600 million, Mr Deputy Speaker. At the very least, we want a distributional impact assessment. We want to know who will benefit from the measures, and it is incumbent on the Minister to tell the House the facts.

Geraint Davies:
I have been provoked to stand up and speak on this outrageous stealth tax, which is an attempt to subsidise the very richest in a clandestine way. If hon. Members had known about the £145 million being crept into the back pockets of the very richest people in the City, the Chamber would have been full of Members speaking in protest, as I am doing now.

The direction of travel in the Budget and the spending review continues unabated. It consists of blaming the poorest for the bankers’ errors, punishing them with cuts in public service jobs and wages and cuts in welfare benefits, particularly outside London and the south-east—and especially in Wales—then pumping all the infrastructure growth opportunities into London and the south-east, to line the pockets of the very richest, many of whom were responsible for the disaster in the first place.

The Government are allegedly trying to balance the books, but they are dismally failing to do so. They have decided to sack 600,000 public sector workers. This is having a disproportionate effect in certain parts of the country. Many parts of Wales, for example, are 50% more likely to have public sector workers than London, and it is in those areas that the cuts are biting deepest. Meanwhile, the money is going to places such as London,

2 July 2013 : Column 867

where the cuts are not so deep, not only in infrastructure investment but in measures such as this one. We are talking about getting rid of stamp duty on transactions in the City of London, where a small community of people will benefit from that tax cut of £145 million a year, and rising.

We must set against that the fact that 2 million people are already using payday loans. Dividing the £145 million between those 2 million people would give them about £70 each. Only today, I have been talking to colleagues in Swansea about the emerging problem on our council estates, and on estates generally, of companies setting up shop to take advantage of people in dire need by offering them payday loans. At the same time as the Chancellor announced this cut in stamp duty, he asked the newly unemployed to wait an extra week before receiving their money. That will of course feed the stomachs of the payday loan sharks. Those sharks are not just the well-known wonga people; they are also the new, smaller operations setting up in very poor communities. They hire people in the community, on a commission basis, to persuade their neighbours to take out loans at exorbitant rates of interest that they cannot afford. They then harass them by phoning them in the middle of the night or following them into the supermarket, for example, until they repay the loan. That is the cruel reality of Tory Britain today.

Alongside that reality, we have this ghastly attempt to give another £145 million to some of the richest people in the banking community, who were part of the problem in the first place. The alleged justification is to make the City of London more competitive. It appears that these whizz kid City folk, with their red braces, zoom up in their Rolls-Royces to see their old Etonian friends, such as Ministers, and look in awe at them and say, “Have another champers, will you, Minister?” and all that sort of stuff.

7.30 pm

The Financial Secretary to the Treasury (Greg Clark):
I think that the hon. Gentleman will find that I went to a comprehensive school in Middlesbrough, not to Eton.

Geraint Davies:
I am sorry that the right hon. Gentleman no longer has any school friends. Those who have abandoned the communities from which they came have proposed legislation to punish the poorest and reward the richest, which is a great shame. It is not too late for the Minister to think again about what is fair and right in distributive economics.

The reality is that the marginal impact of this change on the competitiveness of the City of London is very small indeed; it is not a serious argument. I can imagine the greed-fuelled lobbyists who come here on behalf of the City to demand an extra £145 million being the sort of people who say, “Oh, well, we have got to give these people more money, because otherwise they will leave the country.” We have heard all that before. In any case, many of those individuals have all sorts of tax havens, about which the Government pay lip service to investigating.

At the same time as we hear alleged concerns about those rich people avoiding tax, the Government say to them, “I’ll tell you what; here’s another 5p off the income

2 July 2013 : Column 868

tax.” People sometimes ask why there has been a 64% increase in bonuses this year. Could it be because the Government have provoked it, as people move their income from a tax year where they pay 50p to a tax year where they pay 45p? It was completely predictable, and it was even factored into the Treasury figures in the form of behavioural changes. The perverse thing was to hear the argument, “Oh, well, we are going to move to 45p instead of 50p because more money can be raised that way. Look, we are going to encourage our mates to move all their money to save tax”—

Geraint Davies:
Of course. I was wondering whether the mumbling man was listening to anything, but I shall certainly give way to him.

Tim Loughton:
There is of course always a temptation not to listen when the hon. Gentleman is on his feet. Does he remember the Finance Bill 1997, on which Committee he and I both served? I remember him making a similarly prejudicial class-bashing speech then and accusing merchant bankers or anyone working in the City as parasites, yet this industry accounts for many billions of pounds of revenue to the Exchequer and employs 1 million people. Does he still hold to that completely outrageous view? From what he is saying, it sounds as though he does.

Geraint Davies:
It is interesting to see that the hon. Gentleman has changed from his red braces to blue braces—and very nice, too! I obviously do not regard the whole City of London and the banking community as parasites, as they are a major engine for exports, growth and productivity in Britain. The issue is about managed capitalism and what is the acceptable face of capitalism. It seems to me that many people on the hon. Gentleman’s side are not at all concerned, as more and more money is given to people who have already acquired enormous pots of money.

The distribution of income has shifted massively since 2010. We have seen the incomes of a large number of people in the top 10% growing by 5.5% each year over the past two years—at a time when most people have had pay cuts or pay freezes, certainly in the public sector, or lost their jobs. We have heard the Government boasting—this is their latest creative thought—that an extra 1.2 million people are in jobs, yet that has been contradicted by the Office for National Statistics. Even if there were another million extra people in work, with no extra growth and no extra output in the economy, productivity is going down and things are not going well. Nevertheless, the answer from the Government is still to give more and more money to the richest people and less to the poorest, and that is supposed to get us out of the mess, but it does not.

This stamp duty on transactions is the tip of an iceberg. I am sorry, Mr Deputy Speaker, that I have come on to describe the entire iceberg rather than the tip at the top, which we are talking about. It is important for people to stand up and be counted on this issue. There is no justification for these extra few buckets of money being thrown in the direction of those who have

2 July 2013 : Column 869

most. There is a great need for a more balanced growth strategy, whereby there is investment in infrastructure across the piece and where the opportunities for tax and spend are more fairly spread, so that together we can build a future that works and a future that cares—a one-nation Britain of which we can all be proud. I do not think that this suggestion makes sense, so I am very much in favour of putting a halt to this £145 million handout to people who are already rich, as it will not make any appreciable difference to the competitiveness of the City of London.

Greg Clark:
This has been an astonishing debate. I have a lot of time for the hon. Member for Nottingham East (Chris Leslie), but he must have been pretty dozy in recent months if he thinks that this is a Budget measure that has emerged by stealth having hitherto been hidden from view, because it was given considerable prominence in the Chancellor’s Budget speech. The Chancellor said, in the Chamber,

“I also want Britain to be the place where people raise money and invest. Financial services are about much more than banking. In places such as Edinburgh and London we have a world-beating asset management industry, but they are losing business to other places in Europe. We act now with a package of measures to reverse that decline, and we will abolish the schedule 19 tax, which is payable only by UK-domiciled funds.”—[Official Report, 20 March 2013; Vol. 560, c. 939.]

However, the measure did not only feature in the Chancellor’s Budget speech. It was the subject of a press conference, and received quite a lot of publicity on the money pages. I should have thought that the shadow Financial Secretary would be aware of that, and would know what a good reception the proposal was given in the very important financial services industry.

Many misconceptions need to be cleared up. The hon. Member for Swansea West (Geraint Davies) talked about banking, but this measure has nothing whatever to do with banking. A regrettable consequence of what has happened in recent years is that the financial services sector as a whole has too often been equated with the banking industry and associated with its frequently catastrophic misjudgments and regulatory failures, and people have been tainted unfairly by that association. Just as there are hundreds of thousands of ordinary working people employed by banks who bear no responsibility for—indeed, are sickened by—some of the misdeeds that were committed by those at the top before and during the crisis, there are people who work hard for a living elsewhere in financial services, who contribute to our national income, the taxes that pay for our public services and our foreign exchange earnings, and who have certainly not put taxpayers' funds at risk in the way that characterised the worst excesses of the banking industry.

The investment management industry in this country is a case in point. It employs 30,000 people across the United Kingdom, mostly in areas such as administration, IT and legal services. At least 10,000 of these people, who are directly employed in the sector—I am not talking about those who are ancillary to it—are based outside London and the south-east. A large number of them are concentrated in Scotland—I should have thought that the hon. Member for Dumfries and Galloway (Mr Brown) would be aware of that—and in the north-west and the north midlands. In fact, 12% of the asset management industry is in Scotland. I am amazed that

2 July 2013 : Column 870

the hon. Member for Nottingham East—not just as shadow Financial Secretary, but as a Nottingham Member of Parliament—did not recognise the important contribution made by investment management in his city. He should be aware that the professional services sector in Nottingham is an important component of the city’s economy.

Chris Leslie:
The Financial Secretary is characterising the Opposition as if we were somehow denigrating the investment management community. Far from it. We are simply asking this question: where is the hardship that justifies £150 million of generosity from the taxpayer at this point in time?

Greg Clark:
I shall come to that. The hon. Gentleman professed not to recognise the problem that existed. As I have said, given the position that he enjoys, I would expect him to be aware of the long-standing damage to the competitiveness of an industry that employs people in his constituency. There are some very distinguished firms in his constituency. The Nottingham office of Brewin Dolphin has been there for 150 years, and I think that it is a vital component of our regional economy. These are valuable jobs, and they exist throughout the country.

The British investment management industry has a strong reputation internationally, yet—here we come to the reason for the reform—since 2000, countries such as Luxembourg and Ireland have increased their market share of domiciled funds dramatically in comparison with the United Kingdom. In fact, the UK’s share of EU domiciled funds has dwindled to less than half that of Luxembourg and has been overtaken by Ireland.

What is the reason for that? It cannot be because the reputation of British fund management has declined, as many of the funds domiciled elsewhere in Europe are in fact managed remotely by fund managers within the UK. It cannot be because the fundamental competitiveness of UK financial services has declined, because we have maintained, and very often increased, our market share in other parts of the financial services industry. For example, twice as many euros are traded in the UK than in the entire eurozone. One of the principal reasons for this competitive decline is a consequence—unintended, I am sure—of a change in the tax system that was made in 1999, and whose effect everyone agrees has been deleterious.

Schedule 19 to the Finance Act 1999 imposed a special stamp duty reserve tax—SDRT—on the investment management industry when fund managers match investors leaving a fund and surrendering their units with those joining the fund and purchasing the units. Because the fund manager is not buying any UK shares, no stamp duty reserve tax is payable, but schedule 19 imposes a tax of 0.5% on the fund manager, as if the shares have been bought. Of course, whenever a fund manager buys UK shares within a fund, full stamp duty is paid. As well as being complex and burdensome—requiring frequent tax calculations and returns to be sent to HMRC—there is a major flaw with schedule 19. Anyone who does not wish to pay schedule 19 can simply invest in otherwise identical funds, have them managed by a UK fund manager, but have them domiciled elsewhere, and that is what has happened in recent years. Such a non-UK fund could hold exactly the same equities as a UK fund, and that is happening in large numbers. It could be

2 July 2013 : Column 871

managed by a UK fund manager, but the investor would—by investing in a fund in Luxembourg or Ireland, for instance—not need to pay schedule 19.

Why should this matter? [Interruption.] I think the shadow Chief Secretary should take an interest, since he was not aware of the problem to which this is the solution. What are the advantages of having funds domiciled in the UK? First, there are advantages in terms of jobs, particularly in the regional economy. While fund managers can operate from anywhere, most jobs in fund management come from ancillary services and the professional services associated with them. These are high-value jobs in IT, legal services and accountancy support, and they are typically in the jurisdictions in which the funds are domiciled.

Secondly, there are advantages in terms of tax revenue. Although schedule 19 imposes SDRT on fund managers matching investors for UK funds, the Exchequer would be advantaged by having more funds domiciled in the UK, as that would involve the paying of income tax, national insurance, VAT, business rates and other taxes by people who would be employed here, rather than in Luxembourg, Ireland and other countries, and corporation tax by the companies supplying ancillary services.

Finally, who pays? It is pensioners who pay. Schedule 19 does not come out of the pay of fund managers. It is a cost of business that is invariably passed on to UK investors. It comes out of the returns and lessens the funds that are otherwise available.

Andrew Selous (South West Bedfordshire) (Con):
My right hon. Friend is making an excellent speech and I am listening with great interest. Is there not a further point in that, given that the Government have just started rolling out auto-enrolment, many lower paid workers across the country have a real interest in the health of the fund management industries for their pensions, and probably want their money managed in the UK rather than Luxembourg?

Greg Clark:
My hon. Friend makes an excellent point. He is absolutely right. Already 81% of investors in UK funds are pension funds or insurers, meaning that people’s income in retirement is impaired and fewer funds are available for investment in the real economy. Two-thirds of individuals approaching retirement are contributing to a pension fund from where these charges are taken, and the introduction of automatic enrolment will mean that many more ordinary working people will be saving into a pension for the first time and will be affected.

So there is a double imperative to act now to correct this situation in which funds are moving from being domiciled by choice in this country to overseas. First, any continuing loss of competitiveness by the UK fund management industry risks destroying, possibly for ever, the critical mass and prominent global position that the industry has had. Secondly, we are on the cusp of a once-in-a-generation opportunity for the UK fund management industry, and, with it, the UK economy, because in July the EU’s alternative investment fund managers directive comes into force, creating a much more effective single market across Europe in fund management. It is estimated that €250 billion of funds

2 July 2013 : Column 872

may be available for the UK, and other competitors, to play host to. That is to say nothing of the significant growth shown in the emerging economies, where a burgeoning middle class is looking to make investments for which the EU is an attractive home.

7.45 pm

The opportunity for the UK to attract those funds depends on the abolition of schedule 19. That is why the Budget proposed, in pretty high-profile terms, the abolition of schedule 19. The measure will be included in next year’s Finance Bill. The draft legislation, including a tax information and impact note, will be published for consultation in the autumn, to inform the consideration of next year’s Finance Bill—that never happened under the previous Government; this is totally transparent. The costs that have been included very prudently in the Red Book represent a conservative case; they do not include any of the effects or any assumption of what would happen if we reverse this relative decline compared with jurisdictions such as Ireland and Luxembourg so that we have an increasing tax take from people being employed there. The included costs do not reflect the potential boost to stamp duty reserve tax revenue— empirically, investment funds tend to have more active investment strategies than direct investors and are more likely to incur it. Those aspects will be further elaborated during the consultation and the tax information and impact note during the next six months.

Geraint Daviesrose—

Greg Clark:
I want to conclude now. I hope that the House will welcome, as commentators universally have, a significant boost to the competitiveness of a very important sector for jobs in every part of the United Kingdom. I hope that, having had the explanation, the hon. Member for Nottingham East will feel willing to withdraw the new clause and await the formal consultation, which will accompany next year’s Finance Bill.

Chris Leslie:
You have to hand it to the Financial Secretary, because he managed to keep a straight face throughout that, but I can almost hear the thumping of those trading desks across the City of London as people are delighted at the largesse of a £150 million tax giveaway to those poor, downtrodden investment managers, who really need that helping hand just now. That £150 million is the same amount as the Government saved when they abolished the health in pregnancy grant—that was not a priority; making sure that they abolish stamp duty reserve tax on unit trust transactions is where that £150 million had to go. That is completely crazy. They cannot even agree to a distributional analysis because they know that it is the wealthiest in the society who benefit from this. Therefore, we shall be pushing new clause 11 to a Division.

Question put, That the clause be read a Second time.

The House divided:

Ayes 212, Noes 274.

Division No. 42]

[

7.48 pm

AYES

Abrahams, Debbie

Ainsworth, rh Mr Bob

Alexander, rh Mr Douglas

Alexander, Heidi

Ali, Rushanara

Allen, Mr Graham

Anderson, Mr David

Ashworth, Jonathan

Austin, Ian

Bailey, Mr Adrian

Bain, Mr William

Balls, rh Ed

Banks, Gordon

Barron, rh Mr Kevin

Bayley, Hugh

Begg, Dame Anne

Benn, rh Hilary

Benton, Mr Joe

Berger, Luciana

Betts, Mr Clive

Blackman-Woods, Roberta

Blenkinsop, Tom

Blomfield, Paul

Blunkett, rh Mr David

Brennan, Kevin

Brown, Lyn

Brown, rh Mr Nicholas

Brown, Mr Russell

Burden, Richard

Byrne, rh Mr Liam

Campbell, Mr Alan

Campbell, Mr Ronnie

Caton, Martin

Champion, Sarah

Chapman, Jenny

Clark, Katy

Clarke, rh Mr Tom

Clwyd, rh Ann

Coaker, Vernon

Coffey, Ann

Connarty, Michael

Cooper, rh Yvette

Corbyn, Jeremy

Creagh, Mary

Creasy, Stella

Cruddas, Jon

Cryer, John

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Sir Tony

Curran, Margaret

Dakin, Nic

David, Wayne

Davidson, Mr Ian

Davies, Geraint

De Piero, Gloria

Denham, rh Mr John

Dobson, rh Frank

Docherty, Thomas

Dodds, rh Mr Nigel

Donohoe, Mr Brian H.

Doran, Mr Frank

Doughty, Stephen

Dowd, Jim

Doyle, Gemma

Dromey, Jack

Dugher, Michael

Durkan, Mark

Eagle, Ms Angela

Eagle, Maria

Edwards, Jonathan

Efford, Clive

Ellman, Mrs Louise

Engel, Natascha

Esterson, Bill

Evans, Chris

Field, rh Mr Frank

Flello, Robert

Flynn, Paul

Gapes, Mike

Gardiner, Barry

Gilmore, Sheila

Glass, Pat

Glindon, Mrs Mary

Godsiff, Mr Roger

Goggins, rh Paul

Goodman, Helen

Greatrex, Tom

Green, Kate

Greenwood, Lilian

Griffith, Nia

Gwynne, Andrew

Hain, rh Mr Peter

Hamilton, Fabian

Hanson, rh Mr David

Harris, Mr Tom

Havard, Mr Dai

Healey, rh John

Hermon, Lady

Hillier, Meg

Hilling, Julie

Hoey, Kate

Hopkins, Kelvin

Howarth, rh Mr George

Hunt, Tristram

Irranca-Davies, Huw

Jackson, Glenda

James, Mrs Siân C.

Jamieson, Cathy

Jarvis, Dan

Johnson, rh Alan

Johnson, Diana

Jones, Graham

Jones, Helen

Jones, Mr Kevan

Keeley, Barbara

Kendall, Liz

Khan, rh Sadiq

Lavery, Ian

Leslie, Chris

Lewell-Buck, Mrs Emma

Llwyd, rh Mr Elfyn

Long, Naomi

Love, Mr Andrew

Lucas, Caroline

MacNeil, Mr Angus Brendan

Mactaggart, Fiona

Mahmood, Mr Khalid

Mahmood, Shabana

Malhotra, Seema

Mann, John

Marsden, Mr Gordon

McCabe, Steve

McCann, Mr Michael

McCarthy, Kerry

McClymont, Gregg

McDonagh, Siobhain

McDonald, Andy

McFadden, rh Mr Pat

McGovern, Alison

McGovern, Jim

McGuire, rh Mrs Anne

McKechin, Ann

McKenzie, Mr Iain

McKinnell, Catherine

Meacher, rh Mr Michael

Meale, Sir Alan

Mearns, Ian

Miller, Andrew

Moon, Mrs Madeleine

Morden, Jessica

Morrice, Graeme

(Livingston)

Morris, Grahame M.

(Easington)

Mudie, Mr George

Murphy, rh Mr Jim

Murphy, rh Paul

Murray, Ian

Nandy, Lisa

Nash, Pamela

Onwurah, Chi

Osborne, Sandra

Owen, Albert

Pearce, Teresa

Perkins, Toby

Phillipson, Bridget

Pound, Stephen

Qureshi, Yasmin

Reynolds, Jonathan

Ritchie, Ms Margaret

Robertson, Angus

Robertson, John

Robinson, Mr Geoffrey

Rotheram, Steve

Ruane, Chris

Ruddock, rh Dame Joan

Sarwar, Anas

Sawford, Andy

Seabeck, Alison

Shannon, Jim

Sharma, Mr Virendra

Shuker, Gavin

Simpson, David

Skinner, Mr Dennis

Slaughter, Mr Andy

Smith, rh Mr Andrew

Smith, Owen

Spellar, rh Mr John

Tami, Mark

Thornberry, Emily

Timms, rh Stephen

Trickett, Jon

Turner, Karl

Twigg, Derek

Twigg, Stephen

Vaz, Valerie

Walley, Joan

Watts, Mr Dave

Weir, Mr Mike

Whiteford, Dr Eilidh

Whitehead, Dr Alan

Williams, Hywel

Williamson, Chris

Wilson, Phil

Wilson, Sammy

Winnick, Mr David

Winterton, rh Ms Rosie

Wishart, Pete

Wood, Mike

Woodcock, John

Wright, David

Wright, Mr Iain

Tellers for the Ayes:

Susan Elan Jones

and

Mr Frank Roy

NOES

Adams, Nigel

Afriyie, Adam

Aldous, Peter

Alexander, rh Danny

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, Steve

Baldry, Sir Tony

Baldwin, Harriett

Barclay, Stephen

Baron, Mr John

Barwell, Gavin

Bebb, Guto

Bellingham, Mr Henry

Beresford, Sir Paul

Berry, Jake

Bingham, Andrew

Binley, Mr Brian

Birtwistle, Gordon

Blackwood, Nicola

Blunt, Mr Crispin

Bone, Mr Peter

Bradley, Karen

Brady, Mr Graham

Brake, rh Tom

Bray, Angie

Brazier, Mr Julian

Bridgen, Andrew

Brine, Steve

Brooke, Annette

Browne, Mr Jeremy

Bruce, Fiona

Bruce, rh Sir Malcolm

Buckland, Mr Robert

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Byles, Dan

Cairns, Alun

Carmichael, rh Mr Alistair

Carmichael, Neil

Carswell, Mr Douglas

Cash, Mr William

Chishti, Rehman

Clappison, Mr James

Clark, rh Greg

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Cox, Mr Geoffrey

Crabb, Stephen

Crockart, Mike

Crouch, Tracey

Davies, David T. C.

(Monmouth)

Davies, Glyn

Davies, Philip

Dinenage, Caroline

Djanogly, Mr Jonathan

Dorries, Nadine

Doyle-Price, Jackie

Drax, Richard

Duddridge, James

Duncan, rh Mr Alan

Ellis, Michael

Ellison, Jane

Elphicke, Charlie

Eustice, George

Evans, Graham

Evans, Jonathan

Evennett, Mr David

Fabricant, Michael

Fallon, rh Michael

Farron, Tim

Featherstone, Lynne

Field, Mark

Foster, rh Mr Don

Fox, rh Dr Liam

Francois, rh Mr Mark

Freeman, George

Freer, Mike

Fuller, Richard

Garnier, Mark

Gauke, Mr David

George, Andrew

Gibb, Mr Nick

Gilbert, Stephen

Goodwill, Mr Robert

Gove, rh Michael

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Green, rh Damian

Greening, rh Justine

Grieve, rh Mr Dominic

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Halfon, Robert

Hames, Duncan

Hammond, Stephen

Hancock, Matthew

Hancock, Mr Mike

Harper, Mr Mark

Harris, Rebecca

Hart, Simon

Harvey, Sir Nick

Hayes, rh Mr John

Heald, Oliver

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hendry, Charles

Herbert, rh Nick

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Hopkins, Kris

Horwood, Martin

Howell, John

Hughes, rh Simon

Hunt, rh Mr Jeremy

Hunter, Mark

Jackson, Mr Stewart

James, Margot

Javid, Sajid

Jenkin, Mr Bernard

Johnson, Gareth

Johnson, Joseph

Jones, rh Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kirby, Simon

Knight, rh Mr Greg

Kwarteng, Kwasi

Laing, Mrs Eleanor

Lamb, Norman

Lancaster, Mark

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Leadsom, Andrea

Lee, Dr Phillip

Leech, Mr John

Lefroy, Jeremy

Leigh, Sir Edward

Leslie, Charlotte

Letwin, rh Mr Oliver

Lewis, Dr Julian

Lilley, rh Mr Peter

Lloyd, Stephen

Lord, Jonathan

Loughton, Tim

Luff, Peter

Lumley, Karen

May, rh Mrs Theresa

Maynard, Paul

McCartney, Jason

McCartney, Karl

McLoughlin, rh Mr Patrick

McPartland, Stephen

McVey, Esther

Menzies, Mark

Mercer, Patrick

Metcalfe, Stephen

Miller, rh Maria

Mills, Nigel

Milton, Anne

Mordaunt, Penny

Morgan, Nicky

Morris, Anne Marie

Morris, James

Mulholland, Greg

Munt, Tessa

Murray, Sheryll

Neill, Robert

Newmark, Mr Brooks

Newton, Sarah

Nokes, Caroline

Nuttall, Mr David

O'Brien, rh Mr Stephen

Offord, Dr Matthew

Ollerenshaw, Eric

Opperman, Guy

Paterson, rh Mr Owen

Pawsey, Mark

Penning, Mike

Penrose, John

Percy, Andrew

Perry, Claire

Phillips, Stephen

Pincher, Christopher

Poulter, Dr Daniel

Prisk, Mr Mark

Raab, Mr Dominic

Reckless, Mark

Redwood, rh Mr John

Rees-Mogg, Jacob

Reevell, Simon

Reid, Mr Alan

Robertson, rh Hugh

Robertson, Mr Laurence

Rogerson, Dan

Rosindell, Andrew

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Sanders, Mr Adrian

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Shepherd, Sir Richard

Skidmore, Chris

Smith, Miss Chloe

Smith, Henry

Smith, Julian

Smith, Sir Robert

Soames, rh Nicholas

Soubry, Anna

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stanley, rh Sir John

Stevenson, John

Stewart, Bob

Stewart, Iain

Stewart, Rory

Streeter, Mr Gary

Stride, Mel

Stuart, Mr Graham

Sturdy, Julian

Swales, Ian

Swayne, rh Mr Desmond

Swinson, Jo

Swire, rh Mr Hugo

Syms, Mr Robert

Teather, Sarah

Thornton, Mike

Timpson, Mr Edward

Tomlinson, Justin

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Walker, Mr Robin

Wallace, Mr Ben

Walter, Mr Robert

Watkinson, Dame Angela

Weatherley, Mike

Wharton, James

Wheeler, Heather

White, Chris

Whittaker, Craig

Whittingdale, Mr John

Wiggin, Bill

Willetts, rh Mr David

Williams, Mr Mark

Williams, Stephen

Williamson, Gavin

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Wright, Simon

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Noes:

Jenny Willott

and

Greg Hands

Question accordingly negatived.

2 July 2013 : Column 873

2 July 2013 : Column 874

2 July 2013 : Column 875

2 July 2013 : Column 876

New Clause 1

Transfer of personal allowances between spouses

‘After section 37 of the Income Tax Act 2007, insert—

“37A Transfer of personal allowances between spouses

(1) This section applies to an individual who is entitled to a personal allowance under sections 35 to 37 for a tax year if—

(a) the individual is a person whose spouse who is living with the individual for the whole or any part of the tax year,

(b) the individual is, for the whole or any part of the tax year, usually resident with at least one child who is under the age of 5 years at the end of the tax year, or such other age as is specified by order; and

(c) the spouse meets the requirements of section 56 (residence, etc).

(2) If—

(a) the allowance exceeds the individual’s income;

(b) the individual makes an election; and

(c) the individual’s spouse makes a claim;

the individual’s spouse is entitled to an allowance for the tax year equal to the amount of the transferable allowance subject to a maximum amount, if any, specified by order.

(3) The individual’s transferable allowance is found by—

(a) taking any personal allowance to which the individual is entitled for the tax year, and

(b) subtracting the amount of the individual’s income.

(4) For the purposes of this section “spouse” includes civil partners.

(5) For the purposes of this section an “order” means order made by statutory instrument a draft of which has been laid before and approved by resolution of the House of Commons.

(6) This section shall have effect for the tax year 2014-15 and subsequent years.

2 July 2013 : Column 877

37B Election for transfer of allowance under section 37A

‘(1) An election under section 37A—

(a) must be made not more than 4 years after the end of the tax year to which it relates;

(b) cannot be withdrawn; and

(c) cannot be made before 6 April 2015.

(2) If an individual makes an election for a tax year under section 37A the individual is treated as also giving notice under section 51(4) that section 51(1) (tax reductions for married couples: transfer of unused relief) is to apply for the tax year.”.’.—(Tim Loughton.)

Brought up, and read the First time.

8 pm

Tim Loughton:
I beg to move, that the clause be read a Second time.

I am delighted to have the opportunity to speak to new clause 1, albeit very briefly. It is rather ironic that this issue has probably been one of the most over-reported aspects of this Finance Bill, when it was not even in the Bill and we have only a minuscule amount of time to discuss it. Many colleagues here would like to speak to the new clause, and many others have come up to me to express their support.

There has been a lot of misreporting about the new clause, which has commonly been referred to as some sort of “rebel” amendment. It is strange when a manifesto commitment, which was also in the coalition agreement, to a measure of which the Prime Minister himself is a huge fan, becomes a rebel amendment. We are not rebels. There has been no campaign to orchestrate some sort of rebellion; in fact, there was never any intention to force the new clause to a vote, as anyone who had asked would have found out. New clause 1 is simply a helpful amendment, tabled solely in my name, to nudge the Chancellor to give a formal commitment in law to a Conservative party pledge—a popular one at that—and to name the day, and so dispel the concerns caused by vague references to the measure being introduced “in due course”.

The measure was good enough to be in the Conservative party manifesto. It was good enough to be argued out in the coalition agreement, with accommodation for the Liberal Democrats. It has been good enough for the Chancellor and Treasury Ministers and the Prime Minister quite rightly to reaffirm its importance, so surely it must be good enough to get on with now, to lay to rest any uncertainty about the commitment to its implementation and to end any delay in its becoming a reality. I am therefore delighted, even if I have little time to express my delight this evening, that the Prime Minister has indicated that the measure in the new clause will now be brought forward. I hope that the Minister will be able to assure me from the Dispatch Box this evening, or, if there is no time, by writing to me and other hon. Members, that the measure will be in the next autumn statement, with a view to putting it in the next Finance Bill, so that, hopefully, the money will be in people’s pockets by the time of the next election.

I have framed the new clause to give the Chancellor maximum flexibility to determine the exact details of its execution. Spouses, civil partners and indeed the beneficiaries of same-sex marriage, if that Bill goes through, will qualify. There is no prescription about whether the provision applies to basic rate or higher rate taxpayers, or whether the whole or part of an allowance should be

2 July 2013 : Column 878

transferable. That can be specified by order to suit the Chancellor. It is suggested that the tax relief should focus on couples with at least one child under the age of five—that is, under school age—and therefore correspond to the child care allowances to be introduced from 2015, but that, too, can be changed by order. This is not a prescriptive amendment.

What is uncertain is the timing. I hope that the Minister will be able to confirm what the Prime Minister said in the briefing that he and officials gave on the other side of the world that the measure will be in the next Finance Bill.

Perhaps the most extraordinary aspect of this debate has been the reaction of the left to the proposal. This is a popular proposal, and a modest one. It is popular among the public and among the majority of Labour voters. The Lib Dems are split on it, but one would expect that: it is party policy to oppose it, but only recently the Business Secretary attacked the prejudice against stay at home mothers. When we have an organisation, Don’t Judge My Family, apparently formed solely to oppose the measure, saying that it is a throwback to a 1950s fantasy family image, that is deeply insulting not only to the many millions of married couples who decide to make a lifelong commitment to each other in front of their families and friends that is recognised in law, but to the 90% of young people and the 75% of cohabiting under-35s who in recent opinion polls have said that they aspire to get married.

There are many different forms of family in the 21st century, and most do a fantastic job of keeping together and bringing up children, often in difficult circumstances, yet almost uniquely among large OECD countries, the UK does not recognise the commitment and stability of marriage in the tax system until one of the partners dies. Worse still, one-earner married couples on an average wage with two children face a tax burden 42% greater than the OECD average, and that gap has been getting worse.

So to introduce a recognition of marriage in the tax system, particularly in the modest form suggested, is not to disparage those single parents who find themselves single through no fault of their own, perhaps as a result of having had an abusive or deserting partner, nor is it to undermine two hard-working parents, all of whom get help and support from the state in other forms, and quite rightly. But uniquely, married couples, civil partners and same-sex married couples in future are discriminated against in the tax system.

Jim Shannon (Strangford) (DUP):
I thank the hon. Gentleman for giving way and I am conscious of the time. Like him, I passionately believe in marriage, as do my constituents in Strangford. They are keen to see the benefits for their families and their children in Strangford, across the whole of Northern Ireland and in the United Kingdom. Does the hon. Gentleman have an assurance from the Government that the time scale will be met? In other words, will the marriage tax allowance be delivered before the next election?

Tim Loughton:
I very much hope so. That was the clear indication that the Prime Minister gave in his briefing in Pakistan. I very much hope that the Minister will be able to confirm, because the timing of the measure is important, that it is not something that will be done “in due course”, but in the next Finance Bill.

2 July 2013 : Column 879

Sir Edward Leigh (Gainsborough) (Con):
Will my hon. Friend allow me?

Tim Loughton:
I briefly give way to my hon. Friend, who has been a great champion of this measure for many years.

Sir Edward Leigh:
Not just the Prime Minister in a faraway place, but the Chancellor of the Exchequer, in my own home, not 300 yards away, in front of 40 MPs, gave a solemn pledge that this was going to be brought in before the general election. This will and must happen.

Tim Loughton:
So the mystery is why on earth it is not happening and the Prime Minister has not been able to say, “We back this amendment.” However, I trust what he has said. Those I do not trust are those who oppose the amendment, because those who oppose it as some sort of 1950s throwback are the ones who are being judgmental about how certain people choose to live their relationships. That view has been endorsed on many Labour party members’ blogs. Disgracefully, they seek, in effect, to pit working mums or dads against stay at home mums or dads, who are of course no less, and often more, hard-working.

My support for a transferable married couples tax allowance has never been based on some moral stance on types of relationship. My concern, as might be expected, is based on what is best for children. That is why I have suggested that it is limited in the first instance to families with children under the age of five. Two statistics say why. For a 15-year-old living at home with both birth parents, there is a 97% chance that those parents are married. For a five-year-old with parents at home, there is a one in 10 chance of those parents splitting up if they are married, but a one in three chance if they are not married. The cost of family breakdown is £46 billion and rising. That is what we need to attack.

Marriage accounts for 54% of births but only 20% of break-ups among families with children under five. We must recognise that in the tax system and we do not. That is what this modest amendment seeks to put in statute as a starting point to appreciate that.

Andrew Selous:
My hon. Friend is making an excellent speech. Does he agree that we encourage many things in the tax system—for example, employees cycling to work? It is therefore no great surprise that we want to support marriage, given the number of families that split up each year.

Tim Loughton:
And marriage was invented before bicycles, so why do we not support that, recognise it and value it, as we all do?

There are those who have come up with arguments against the figures, saying it is all about causation and effect. The millennium cohort research revealed that the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples, so it is insulting to say that marriage is the preserve of the middle classes or better educated or better-off people.

This amendment alone will not solve all the problems that I have laid out. I am not naive enough to suggest that £150 or whatever the end result may be when this amendment becomes law in some form, as we hope, represents the difference between staying married or

2 July 2013 : Column 880

getting divorced, or getting married or cohabiting, but it does send a clear and strong message that we value families who take the decision to bring up their children within marriage. When I stood on our manifesto in 2010, and for many years before, my Front-Bench colleagues agreed with that. My amendment makes that a reality, beyond all doubt.

Mr David Burrowes (Enfield, Southgate) (Con):
Is it not also a matter of fairness and social justice, because the Institute for Fiscal Studies has shown that 70% of the benefit of a transferable tax allowance would go to those currently on the lower half of the income distribution scale?

Tim Loughton:
My hon. Friend is absolutely right. I think that that dispels many of the myths being put around against the measure.

I hope that the Minister will take the new clause absolutely in the way it was intended. I do not intend to force it to a vote. I think that the Prime Minister has acknowledged the imperative of getting on with it now. I hope that, at last, our constituents can expect to benefit from the proceeds before the next election, both financially and with regard to our clear commitment to marriage, and that we can benefit from delivering on a popular, practical and achievable pledge, rather than the promise of jam in due course. If we can do that, it will be box ticked, job done.

Several hon. Membersrose—

Madam Deputy Speaker (Dawn Primarolo):
Order. Mr Leslie, please ensure that you leave time in the debate, which will end at 8.19 pm, for the Minister and perhaps some Back Benchers as well.

Chris Leslie:
I will be very brief. I want first to pay tribute to the hon. Member for East Worthing and Shoreham (Tim Loughton). I have to hand it to him: he has got the Government jumping around and on the run on this issue. However, I am afraid that the Opposition are not convinced that the millions of people who are separated, divorced, or indeed widowed, would benefit from this policy, let alone those married couples where both partners work. I am all in favour of marriage, and Mrs Leslie might at first glance like the idea of the £150 give-away, but because she works and earns above the personal allowance, it would not be of benefit in our circumstances.

Sir Edward Leigh:
Will the hon. Gentleman give way on that point?

Chris Leslie:
I would rather hear from the Minister.

I think that the right hon. and learned Member for Rushcliffe (Mr Clarke) was right when he called this policy social engineering. He said that when he joined the Conservative party it was opposed to it. The hon. Member for East Worthing and Shoreham seems to have got a commitment that something will be done in the autumn, and we will hear what that happens to be in a moment. In a nutshell, the Opposition’s view is that if there is to be a tax break, it should be for all families, not just a select few, and for all households on lower and middle incomes. That is where tax breaks ought to be focused. I want to hear what the Minister has to say.

2 July 2013 : Column 881

Mr Gauke:
My hon. Friends will be aware that at the last election the Conservative party set out a policy of allowing married couples and civil partners to transfer up to £750 of unused tax-free personal allowance where the recipient is a basic rate taxpayer. They will also be aware that two points in the coalition agreement are relevant to this debate: first, our commitment to increasing the personal allowance to £10,000, to be prioritised over other tax cuts; and secondly, the provision for Liberal Democrats to abstain on Budget resolutions introducing transferable tax allowances for married couples without prejudice to the coalition agreement.

I want to be very clear that the Government support the principle behind the new clause proposed by my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton). We are committed to recognising marriage in the tax system. As we have made clear, and indeed as my hon. Friend the Member for Gainsborough (Sir Edward Leigh) has pointed out, we are committed to legislating for that in this Parliament. The Prime Minister has made it clear that we will be announcing our plans shortly.

I know that my hon. Friend the Member for East Worthing and Shoreham wants us to be specific on implementation. I can assure him that we want to implement this at the earliest opportunity. Of course, recognition of marriage involves a new attribute to our income tax system, requiring Her Majesty’s Revenue and Customs to link married couples in a way that does not currently happen. That is deliverable, but I am not going to set out a timetable today. Once we are able to make an announcement on timing, the Chancellor will do so, but I repeat that we want to do this as soon as possible.

There are some differences between the Conservative party’s position at the last election and new clause 1. The new clause is targeted at a subset of married couples—those with children under the age of five—and does not limit the amount of the allowance that could be transferred, although it gives the Chancellor the ability to restrict that by order. However, it does not apply any income limits or restrictions on the rate of relief, which means that it could provide double the benefit to those paying tax at the higher rate. Obviously we want to make sure that this is well targeted.

There are some specific points about new clause 1 that would need to be addressed regarding the measure of income, the definition of “child”, and the date of election set out in new section 37B(1)(c). However, I assure my right hon. and hon. Friends that we are considering these points in great detail and that an announcement of further details on how we want to take this measure forward will be made by my right hon. Friend the Chancellor in the months ahead.

I hope that my hon. Friend the Member for East Worthing and Shoreham is satisfied with those reassurances and that he feels able to withdraw new clause 1 now that I have put on record our commitment to and belief in legislating for this and our desire to implement it at the soonest opportunity.

8.15 pm

Mr Frank Field (Birkenhead) (Lab):
Had we voted on the new clause tonight, I would have voted for it. I encourage the Government to be much more ambitious in the review that they are undertaking. The new clause

2 July 2013 : Column 882

is about how we maintain greater tax equity between households with two earners and those with one earner, whichever sex those earners may be.

When the Government abolished child benefit for higher rate taxpayers, they did an injustice to the tax system. May I briefly recall why? The background to this, which you will remember, Madam Deputy Speaker, is that we used to have family allowances and child tax allowances. The tax allowance and the benefit were merged into the single payment of child benefit. Child benefit then had two functions: it was a cash payment to mothers but it also maintained tax equity between people further up the income scale who have children and those further up the tax scale who do not have children. By abolishing child benefit for higher-rate taxpayers, the Government forwent the one instrument at their disposal to maintain tax equity for higher-rate taxpayers between those who have no children and those who do have children.

Might I make a plea to the Minister? When the Government undertake the review about the workings of this measure, will they extend it and rectify the injustice whereby in abolishing child benefit for higher-rate taxpayers they abolished the tax-free income for higher-rate taxpayers if they had children and therefore put them on the same level as people who do not have children? We never had that in the tax system before; we have had it in the past couple of years.

Mr Stewart Jackson (Peterborough) (Con):
The House will know that I led a debate on this issue in Westminster Hall on 28 November last year. I, too, pay tribute to my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton) and others who have been so stalwart in this campaign.

Perhaps the right hon. Member for Birkenhead (Mr Field) will have a word with his Front Benchers, because this is about social justice and redistribution. It is about a transferable allowance for married couples disproportionately benefiting those in the lower half of the income distribution much more than under the current policy of encouraging the personal income tax threshold. That is a fact.

The “make work pay” argument is very important too. Transferable amounts would help to make work more rewarding for many of the poorest in society. Moreover, we are out of line, on international comparisons, in not supporting the family.

Those are important issues and this is a big subject. I am sorry that the Minister’s speech was so short, but delighted that those on the Treasury Bench have seen fit to give us these assurances. We will hold them to their word.

Jim Shannon:
Transferable allowances work by families claiming against them for the previous year. Thus this year’s Finance Bill makes provision for transferable allowances for the financial year 2014-15. People will not be able to claim against them until the financial year 2015-16. I will be seeking from the Government an assurance that that will be addressed this year so that it can happen.

Sir Edward Leigh:
This is simply a matter of justice. There are 2 million families where one partner is working and the other is not. They are uniquely disadvantaged in the benefits system, and it is a matter of justice—let’s do it.

2 July 2013 : Column 883

8.19 pm

Six hours having elapsed since the commencement of proceedings on consideration, the debate was interrupted (Programme Order, 1 July).

The Deputy Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83E), That the clause be read a Second time.

Question negatived.

Third Reading

8.20 pm

Mr Gauke:
I beg to move, That the Bill be now read the Third time.

The Finance Bill 2013 delivers the Government’s commitment to creating a tax system that is fair, that promotes growth and competitiveness and that rewards work. This Bill supports enterprise, helps families and ensures that everyone pays their fair share of tax.

We should pause for a moment to remember the background to the Bill. The Government inherited the largest peacetime deficit since the second world war, a deficit we have already reduced by a third over the three years since 2009-10. During this time, more than 1 million new jobs have been created by British business. We have had to make some tough choices, but the results show that we are making the right choices. The Government are leading the road to recovery—to putting the economy back on course—and this Bill continues that agenda.

Mr Russell Brown:
Does the Minister recognise that the 1 million jobs that have been created are allocated disproportionately across the UK? My local authority area has lost 2,000 private sector jobs and the average wage has now fallen 24% below the national average. Some areas are hurting.

Mr Gauke:
It was not that long ago that we were told that the reductions in public sector employment would not be met by new jobs in the private sector, but they have been met many times over. The reality is that we have an astoundingly good record on job creation over the past three years, despite the fact that the economy has faced significant challenges.

This Government have established a corporate tax system that attracts international investment to the country and that encourages UK businesses to grow. Corporation tax will be eight percentage points lower in 2015 than the levels we inherited in 2010. This Bill cuts the main rate to 21% next year and 20% the year after, which will give us the joint lowest rate in the G20, the lowest of any major economy in the world and the lowest rate this country has ever known.

The Bill does that alongside separate action to incentivise activity across the economy. It introduces a new above-the-line credit for large company research and development investment, provides reliefs that are among the most generous in the world for the animation and high-end television industries, and gives long-term fiscal certainty to the oil and gas industry on decommissioning tax relief.

Mr Stewart Jackson:
There was no time to debate new clause 3 on air passenger duty so I will not speak to it, but will the Treasury continue to review the effects of APD on the travel industry and the wider economy?

2 July 2013 : Column 884

Mr Gauke:
We keep all taxes under review. My hon. Friend is a prominent voice on this particular matter and I am sure he will continue eloquently to make the case on APD to Treasury Ministers.

Lady Hermon (North Down) (Ind):
I am grateful to the Minister for taking a second intervention so soon after the first. Does he realise that APD is particularly damaging to the ambition of rebalancing the economy in Northern Ireland, especially when there is such a low level of APD just over the border in the Republic of Ireland? Will he undertake to look seriously at the issue with regard to Northern Ireland?

Mr Gauke:
The hon. Lady will be aware that we have made a number of concessions in that area with regard to Northern Ireland and I say again that we will keep those matters under review.

The Bill will support a wide variety of sectors, encourage innovation and send the clearest possible signal that business is welcome in the UK.

The Government’s strategy is underpinned by our commitment to fairness. The Bill will reward hard work and help families with the cost of living. It will lift an additional 1.1 million individuals out of income tax with the largest ever cash increase to the personal allowance. The allowance will be set at £9,440, making assured progress towards the longer-term objective of making the first £10,000 of income free from income tax. That objective will allow people to keep more of the money that they earn.

I should not have to remind hon. Members that the Bill keeps fuel duty frozen, nor that it removes a penny from beer duty. Those measures will make a real difference and support individuals on low incomes who want to get on.

We are taking steps to ensure that those with the most contribute the most. We have introduced a charge on owners of high-value properties placed in a corporate envelope, along with an extension of capital gains tax on the non-natural persons disposing of those properties. We are targeting reliefs appropriately. The cap on the previously unlimited income tax relief and the reduction of the pensions tax relief lifetime and annual allowances are significant in ensuring that everyone pays their fair share.

We have taken significant action to crack down on tax avoidance and evasion. The Bill legislates for the UK’s first general anti-abuse rule, which provides a significant deterrent to abusive tax avoidance schemes. Where they persist, it will give HMRC the tools to tackle them. Just because something is not covered by the GAAR does not mean that it will not be addressed in other ways. We have closed 15 loopholes that have been used to avoid tax, and strengthened the successful disclosure of tax avoidance schemes regime. Since its introduction in 2004, more than 2,000 tax avoidance schemes have been disclosed to HMRC. The changes made in the Bill will improve the information that promoters have to provide to make it even more effective.

Our position is clear: non-compliance and contrived tax arrangements will not be tolerated. The Bill will help to reduce the tax gap, make the law robust against avoidance and optimise our operational response.

2 July 2013 : Column 885

Jonathan Edwards:
The Minister will be aware that the Silk commission on Wales stated that the Finance Bill would be the appropriate legislative vehicle to implement its findings. Those findings have not been implemented in the Bill, so what legislative vehicle will the Government use to implement the Silk report when they respond?

Mr Gauke:
As the hon. Gentleman says, the Government will respond to the report in due course. Further details will be provided at that point.

On simplification, we continue to shape the tax landscape. A tax system should be easy to administer and to understand. To that end, the Government set up the independent Office of Tax Simplification in 2010. I pay tribute to the invaluable work that it has done. The Bill takes forward the recommendations from its review of small business tax. It introduces two optional simpler income tax schemes for small incorporated businesses and a new time-limited disincorporation relief for small businesses that feel that a corporate form is burdensome. Small businesses make a vital contribution to the UK economy and public finances, and these measures recognise that contribution. We have acted to provide certainty and clarity in other areas. The statutory residence test and the reforms to ordinary residence are a significant and welcome simplification of the tax code, if not a shortening of it.

Many of the measures in the Bill have been subject to extensive consultation and scrutiny—processes that are entrenched in the Government’s approach to making tax policy. The statutory residence test was consulted on three times between summer 2011 and February 2013. The Chartered Institute of Taxation said that that was a

“good example of how to make good tax law”

and we would agree.

The Government have shown their commitment to greater transparency and broadening the range of impacts that they consider. For the Finance Bill 2013 we published more than 400 pages of draft legislation, and we are grateful for the 400 or so responses we received. Through such engagement we have considered the views of interested groups and taxpayers, and we considered them further in Public Bill Committee with more than 49 hours of scrutiny—to some of us, it may have felt longer.

I thank all those involved in the Bill, whether officials, interested parties, parliamentary counsel, my hon. Friends the Economic Secretary to the Treasury and the Financial Secretary to the Treasury, Opposition Members, and Back Benchers, who all contributed to the scrutiny of the Bill. This Finance Bill delivers real reform, supports business and growth, upholds principles of fairness, rewards work, and demonstrates the Government’s commitment to creating a tax system that reduces the deficit and builds a prosperous economy. I commend the Bill to the House.

8.30 pm

Chris Leslie:
I agree with the Minister about one thing—it was certainly a long and well-scrutinised Bill. To elaborate on that brief moment of cross-party agreement, I, too, pay tribute to all Members who served on the Committee, the Clerks, and the officials who helped pull together a substantial legislative moment in the parliamentary calendar—albeit that the Bill does

2 July 2013 : Column 886

not do much to help the economy or do much good for the country at large. I am afraid the Bill offers just more of the same: carrying on regardless of the urgent need for action to stimulate our economy.

We know that the Chancellor, scarred as he was from the omnishambles Budget in 2012, decided to go in the opposite direction this year and produce a Budget that contained so little of any import or substance that the Government’s Office for Budget Responsibility said on page 42 of its Budget report, that the Bill would have

“no impact on the level of GDP at the end of the forecast horizon…these measures reduce GDP growth”

in 2013. It is a Finance Bill that sees the economy moving backwards.

This is in the context of a great deal of humiliation for the Chancellor, including the downgrading by not just one but two credit rating agencies. The cherished prize that was supposed to be at the heart of the Government’s strategy—retaining and defending that benchmark triple A status—is gone. Then, of course, as we saw in the most recent figures, there was the humiliation of a rising deficit, not a fall in levels of borrowing.

This Finance Bill has its priorities all wrong. The lowlights include there being little on growth, but yet persisting with the cut to the top rate of income tax. It means that the fortunate 13,000 people who earn more than £1 million a year will get a lovely, juicy tax cut of £100,000, while typical families will be £891 worse off this year on average because of the changes to tax and benefits introduced since 2010. There are failures in a number of different ways, but it has been particularly piquant this evening to focus on the Government’s largesse and the City tax cut to the stamp duty reserve tax that gives £150 million to the investment manager community.

Richard Fuller (Bedford) (Con)rose—

Chris Leslie:
I am not sure whether the hon. Gentleman is a former investment manager, but I wonder what his view is of that change.

Richard Fuller:
I am grateful for the shadow Minister’s indulgence in allowing me to intervene, and to answer his question, no I am not. The hon. Gentleman mentioned the cut to the top rate of tax and the house tax that Labour wants to introduce. Yesterday, I sat through the debate on Report, and the Opposition Front-Bench speaker was unable to say whether, if Labour get into government in 2015, it would increase the rate of tax and introduce a house tax. For the record, will the hon. Gentleman say whether that is the intention of the Labour party, or is it again just fine words but no real meat?

Chris Leslie:
Fortunately for the hon. Gentleman, but unfortunately for the rest of us, there are still two years of this Parliament to go. He has probably two years of employment left in his parliamentary career and although we think there should be a Labour Member in his seat, we will miss him.

In two years’ time, we will set out the detail in our manifesto. When the Conservatives are in opposition after the general election, we hope to implement a radical manifesto that actually does something to benefit our economy. Today, we would implement a mansion

2 July 2013 : Column 887

tax that would raise a significant sum that we would give away as a tax cut for lower and middle-income households with a new 10p band of income tax. Government Members struggle with this, but we will judge what needs to be in the manifesto in two years’ time when we can judge the needs of the economy.

Government Members think they already know what their fate will be in 2015, hence the Chancellor coming forward with his cuts programme for 2015 when any responsible Chancellor would be rolling his sleeves up this summer and getting on with bringing forward capital infrastructure investment and doing something to stimulate the economy now. There is nothing in the Budget, nothing in the spending review and, more to the point, nothing in the Finance Bill to help growth. Indeed, the most interesting measures are conspicuous by their absence. There is no mansion tax, although there is provision for an annual tax on enveloped dwellings, which usefully illustrates that it is feasible to move in that direction.

Lady Hermon:
In an earlier intervention on the Minister I asked about air passenger duty. In the context of Northern Ireland, would the hon. Gentleman and his colleagues agree to reduce air passenger duty? Rebalancing the economy in Northern Ireland will be difficult to do if this matter is not addressed. Where do the Opposition stand on reducing air passenger duty more generally?

Chris Leslie:
I am sorry that we did not have the opportunity to consider this matter on Report. I think it was given some consideration in Committee. I think we are still waiting for the Government’s review to come to fruition—I am happy to give way to the Minister if he wants to confirm that—and we need to see the evidence. If we feel that any changes in tax and in spending are necessary, we want to spell out clearly where we would get the resources to pay for them. The fact that the Government have ignored not just our advice—[Interruption.]

Madam Deputy Speaker (Dawn Primarolo):
Order. Can we stop the chuntering from Front Bench to Front Bench while someone is trying to speak? Minister, you were listened to in silence and with proper courtesy, so it would be good if you showed that same courtesy to the shadow Minister. Perhaps Ministers and shadow Ministers could pay attention rather than shout at each other.

Chris Leslie:
Madam Deputy Speaker, I am grateful for your protection from the sedentary chuntering of Government Members. They ignore anything they hear, not just from the Opposition but from the International Monetary Fund, which has pointed out that this has been the slowest recovery for a century. There has been barely 1% growth since the 2010 spending review, and the Chancellor predicted there would be 6% growth by now. Living standards have fallen and many families are finding it difficult to make ends meet. Life is much harder.

Mel Stride:
The hon. Gentleman mentions the important pursuit of growth. Will he enlighten the House on what happened to his party’s five-point plan for growth, including his commitment to a reduction in VAT?

2 July 2013 : Column 888

Chris Leslie:
We are desperately keen for the Government to bring forward any measures—whether measures on VAT or bringing forward capital infrastructure—that would stimulate growth. Any Chancellor worth his or her salt would have used last week’s statement in the House to make at least a passing reference to the importance of growth in the economy, but there was absolutely nothing, and the same goes for this Bill.

The problem is not just the neglect of growth and living standards; it is the Government’s failures on borrowing and the deficit, which should be to their shame. They have been totally unable to deliver the promises they made on deficit reduction. [Interruption.] The Minister of State, Northern Ireland Office can tell his constituents that the deficit was £118.5 billion in 2011-12 and £118.7 billion in 2012-13. Even he, with all his skill and acumen, can tell that that is an increase in the level of borrowing from that year to this. No wonder the Government find it an uncomfortable fact that they have failed on their promise and are not on course to balance the books in 2015 as they said they would. That was their solemn promise to the electorate. It is a busted flush.

This Bill is a reflection of the fact that the Government have no answers. They do not know where to go on this issue. It is time we had a Finance Bill to boost the economy, instead of the Government neglecting their duties to achieve strong and sustained economic growth. This Bill is bereft of the bold measures we need to kick-start Britain’s economy. The country deserves better. We oppose a Third Reading of this Bill.

8.41 pm

Jim Shannon:
I want to say a few quick words. I thank the Minister and his team for the hard work they have done during the passage of this Bill. They have made a valuable contribution. I also thank the Opposition for their contribution.

The Government have made a number of welcome legislative changes—they are in the Bill, so they will happen—on child care and family provisions. Like other speakers, I listened with great interest to what the Prime Minister said at the weekend. The subsequent confirmation from Downing street that transferable allowances would be introduced in the 2014 Finance Bill came not a moment too soon. However, I would have liked more positivity from the Government about the time scale for the married tax allowance in new clause 1 to be introduced. It would have been better to have had that opportunity, although we might get it yet.

Reference has also been made to the air passenger duty in Northern Ireland. We know how important it is to the economy—a point that the hon. Member for North Down (Lady Hermon) has made clear. There have also been contributions and input from the Minister for Finance and Personnel in Northern Ireland, my hon. Friend the Member for East Antrim (Sammy Wilson). That has enabled some of the work done in the Bill to suit the Northern Ireland Assembly and the people of Northern Ireland.

In conclusion, let me say on behalf of my party that I would have been happier with a positive commitment to the married tax allowance, although we might get it yet.